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Who's Right on Payroll Tax Fight? The House is Closer

by Andrew Moylan / /

In the ongoing saga of the payroll tax, there's now a fight between the House and Senate approaches to the problem. The House passed a year-long extension of the reduced payroll tax and coupled it with several other good things (expediting a decision to approve the Keystone XL energy pipeline, full expensing of certain assets for businesses) and, unfortunately, some not-so-great things as well (a further extension of extraordinarily long-term unemployment benefits, though in transitioning from a 99-week to a 59-week duration the bill did return substantially closer to the 26 weeks that prevailed pre-recession).

Of even more concern to us was the fact that bill text was available for little more than a day before voting occurred, in direct contravention to House Republicans' pledge to give 72 hours to review all legislation. All told, it wasn't the greatest piece of legislation ever drafted, but it was enough to garner NTU's qualified support because it would have prevented a substantial tax increase in the middle of a difficult economic recovery while advancing the cause of job-creating efforts like Keystone XL.

As is its custom these days, the Senate did not take up and pass the House bill. Instead, they crafted their own two-month extension of the bill thus ensuring another battle over the payroll tax early in the new year. It passed Saturday morning, and right away Speaker Boehner and other House Republicans began saying they could not support this short-term patch. To compound the issue, payroll experts have said that the Senate bill is unworkable anyway. In short, a tweak in the Senate version would essentially create a two-bracket payroll tax (as opposed to the single, flat rate that exists today) which payroll processors claim that their systems cannot accommodate.

NTU's preferred solution to the problem would be to pass a single piece of legislation that extends the reduced payroll tax rate and pairs it with substantial spending reductions to ensure that there is no deficit impact. Heck, we even gave Congress a trillion-dollar head start on identifying the low-hanging fruit of wasteful spending. Neither bill adhered to our preference, but who got closer? Which approach is better for taxpayers?

The answer is the House version. Congress' recent practice of passing short-term extensions on just about everything (the "doc fix," the AMT, the yearly package of "tax extenders," continuing resolutions to fund the government, etc) is quickly becoming more than just tiresome and unfortunate. It's becoming a real threat to taxpayers. Everyone in Washington has known for the entirety of 2011 that the reduced payroll tax rate would expire at the end of the year. We had an entire year to craft a bill that would prevent a tax increase and reduce spending, but only now, a few days before Christmas and just ten days before the end of the year, is Congress even dealing with the issue. The time has come to stop budgeting in fits and starts.

Taxpayers deserve better than this, and businesses and employers all across the country deserve to know what tax system they'll have to comply with in a week and a half. Both chambers of Congress should return to Washington and hammer out a solution, whether through a conference committee or a negotiated solution that prevents a tax hike, cuts spending, and moves the ball forward on job creation.